17210 Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). 

10 Id. 

11 17 CFR 240.19b–4(f)(6)(iii). 

12The Exchange also asked the Commission to 

waive the five-business day pre-filing notice 

requirement. See Rule 19b–4(f)(6)(iii), 17 CFR 

240.19b–4(f)(6)(iii). The Commission is exercising 

its authority to designate a shorter time, and notes 

that the Exchange provided the Commission with 

written notice of its intention to file the proposed 

rule change on March 26, 2007. 

13For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 14 17 CFR 200.30–3(a)(12). 

1Securities Exchange Act Release No,. 50509 

(October 8, 2004), 69 FR 61289 (October 15, 2004) 

(OCC–2003–04). 

burden on competition; and (C) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 8 and Rule 

19b–4(f)(6) thereunder.9

A proposed rule change filed under 

Rule 19b–4(f)(6) 10 normally may not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b–

4(f)(6)(iii) 11 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay, and designate the proposed rule 

change immediately operative.12 The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest.13 The Exchange has 

stated that the amended and restated 

certificate of incorporation of NYSE 

Euronext as modified by this proposed 

rule change must be filed with the 

Delaware Secretary of State before the 

closing of the Combination that is 

scheduled for April 4, 2007. The 

Commission notes that the proposed 

modifications to the amended and 

restated certificate of incorporation of 

NYSE Euronext are technical changes 

that are non-substantive. Accordingly, 

the Commission designates that the 

proposed rule change become operative 

immediately. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2007–33 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2007–33. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2007–33 and 

should be submitted on or before April 

27, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6494 Filed 4–5–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55565; File No. SR–OCC–

2007–04] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing and Order Granting 

Accelerated Approval of a Proposed 

Rule Change Relating to Portfolio 

Margining of Customer Securities 

April 2, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’), notice is hereby given that on 

March 2, 2007, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which items have been prepared 

primarily by OCC. The Commission is 

publishing this notice and order to 

solicit comments from interested 

persons and to grant accelerated 

approval of the proposal. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change amends 

OCC’s Rule 611, Segregation of Long 

Option Positions, to allow a clearing 

member to instruct OCC to unsegregate 

a long options position that is carried in 

a customer’s portfolio margining 

account. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In a rule filing submitted in 2003 and 

subsequently approved by the 

Commission,1 OCC created a 

‘‘customers’ lien account’’ in which 

clearing members are permitted to carry 

positions and collateral that are carried 


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Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices 17211 

2Letter to William H. Navin, Executive Vice 

President, General Counsel and Secretary, OCC 

(July 14, 2005). 

3 Information from Jean Cawley, Deputy General 

Counsel (March 26, 2007). 4 15 U.S.C. 78q–1(b)(3)(F). 

for customers at the firm level in 

portfolio margining accounts. In a 

regular customers account at OCC, all 

long positions must be ‘‘segregated’’

(i.e., held free of OCC’s lien and 

therefore given no value in determining 

margin requirements) except when a 

long position is part of a customer 

spread. This practice was adopted to 

comply with Commission Rule 15c3–3, 

which requires that customers’ ‘‘fully 

paid’’ and ‘‘excess margin’’ securities be 

held free of lien. Because it is 

anticipated that brokers will ordinarily 

be extending credit in portfolio margin 

accounts, the Commission approved 

OCC’s rule filing effectively providing 

that longs in such accounts need never 

be treated as fully paid or excess margin 

securities. The Division of Market 

Regulation also issued a ‘‘no action’’

letter to the effect that no enforcement 

action would be taken against brokerdealers under Rule 15c3–3 for failing to 

segregate customer longs carried in 

portfolio margin accounts.2

OCC has been informed by several 

clearing members that a customers’ lien 

account is not practical for them 

because their customer trades are routed 

to them from many sources and having 

more than one customers’ account could 

result in a large number of clearing 

errors.3 OCC is therefore proposing an 

alternative procedure (‘‘Proposed 

Procedure’’) for clearing members that 

are unable or that elect not to use a 

customers’ lien account. Under the 

Proposed Procedure, a clearing member 

would be permitted to carry portfolio 

margin positions in its regular securities 

customers’ account at OCC. When the 

clearing member submits instructions to 

unsegregate customer longs that are part 

of a spread position, it will also submit 

instructions to unsegregate all longs that 

are carried at the firm level in 

customers’ portfolio margin accounts. 

The result of the Proposed Procedure 

will be that long options required to be 

segregated in the customers’ account 

will continue to be segregated and longs 

that would be unsegregated in a 

customers’ lien account will be 

unsegregated in the regular customers’

account. 

The lien language in both the regular 

customers’ account and in the 

customers’ lien account provides in 

effect that to the extent that OCC has a 

lien on property in the account, the lien 

secures only other assets in that 

particular account. This limitation not 

only ensures that customer longs are not 

pledged to secure proprietary 

obligations of the firm in violation of the 

hypothecation rules, but it is 

conservative in that it does not allow 

the longs to secure positions in other 

customer accounts. Thus, to the extent 

that regular clearing member customers 

have unsegregated longs in the account, 

those positions would be subject to a 

lien securing the obligations of such 

clearing member with respect to its 

portfolio-margining customers whose 

short positions may be included in the 

account as well. Conversely, the longs 

belonging to portfolio-margining 

customers would collateralize the shorts 

of regular customers. 

OCC believes that the proposed 

procedure is appropriate under Rule 

15c3–3 and the hypothecation rules 

(Rules 8c–1 and 15c–2) and is 

appropriate as a matter of policy and 

fairness. There is no requirement to 

separate positions of portfolio margining 

customers from positions of other 

customers and the separate customers’

lien account was intended merely as a 

convenience to avoid the need for daily 

submission of instructions to 

unsegregate long positions in portfolio 

margining accounts. Clearing members 

that are willing to accept that burden in 

order to carry the positions in a regular 

customers’ account should be permitted 

to do so. OCC has requested 

supplemental no-action relief from the 

Commission staff in order to confirm the 

applicability of the previous no-action 

relief to long positions in customer’s 

portfolio margining accounts that are 

carried on an unsegregated basis in the 

regular customers’ account at OCC 

rather than in a customers’ lien account. 

In SR–OCC–2003–04, Rule 611 was 

amended to provide that ‘‘all positions 

in cleared securities that are carried in 

a customers’ lien account shall be 

deemed to be unsegregated for purposes 

of this Rule 611.’’ Although OCC’s rules 

do not specifically require that positions 

in a portfolio margin account at the firm 

level be carried in a customers’ lien 

account at OCC, the rule filing indicated 

that they would be. In approving SR–

OCC–2003–04 creating the customers’

lien account and amending Rule 611, 

the Commission stated: 

Under the portfolio margining 

methodology program, all long positions in 

the customers’ lien account will be available 

as an offset to all short positions, regardless 

of the identity of the customer. This should 

provide for a greater diversification benefit to 

OCC’s clearing members in the calculation of 

their margin. However, because all positions 

in the customers’ lien account will be 

unsegregated and will be therefore subject to 

OCC’s lien, the long positions in the account 

will be available to OCC in the event a 

clearing member fails to settle its obligations 

relating to a short position. Accordingly, 

because the proposed rule change is designed 

to ensure that transactions in securities 

which are eligible for the new portfolio 

margining approved by the Commission will 

be cleared and settled by OCC in a manner 

that will not reduce the adequacy of 

collateral available to OCC, the proposed rule 

change should not adversely affect OCC’s 

ability to assure the safeguarding of securities 

and funds which are in OCC’s custody or 

control or for which OCC is responsible. 

The Commission’s rationale for 

approving SR–OCC–2003–04 should 

apply to the Proposed Procedure as 

well. Rule 611 would simply be 

amended to provide an additional basis 

by which a clearing member may give 

instructions to release long options from 

segregation—namely when they are 

carried for a customer in a porfolio 

margin account. 

The proposed rule change is 

consistent with the purpose and 

requirements of Section 17A of the Act 

because it fosters cooperation and 

competition with persons engaged in 

the clearance and settlement of 

securities transactions, removes 

impediments to and perfects the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions, 

and in general protects investors and the 

public interest by facilitating the 

implementation of portfolio margining 

programs previously approved by the 

Commission. The proposed rule change 

is not inconsistent with the existing 

rules of OCC, including any other rules 

proposed to be amended. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

OCC does not believe that the 

proposed rule change will impose any 

burden on competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were not and are 

not intended to be solicited with respect 

to the proposed rule change, and none 

have been received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder and 

particularly with the requirements of 

Section 17A(b)(3)(F) 4 of the Act, which 


pwalker on PROD1PC71 with NOTICES
17212 Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices 

5 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Exchange By–Law Article VIII. 

4OEO jurisdiction would be limited to the 

Exchange’s options trading floor and systems. 

While acting in a similar capacity to Equity 

Exchange Officials, OEOs would not share any 

responsibilities or authority with Equity Exchange 

Officials. See Securities Exchange Act Release No. 

54538 (September 28, 2006), 71 FR 59184 (October 

6, 2006) (SR–Phlx–2006–43) (Order approving the 

Exchange’s new electronic equity trading system, 

XLE). 

requires that the rules of a clearing 

agency be designed to provide for the 

safeguarding of securities and funds 

which are in its possession or control or 

for which it is responsible. The 

proposed rule change will allow OCC’s 

clearing members and their customers to 

benefit from the portfolio margining 

program, which includes having greater 

liquidity and more efficient use of 

collateral, in a manner that is consistent 

with OCC’s overall risk management 

process. 

The Commission finds good cause for 

approving the proposed rule change 

prior to the thirtieth day after the date 

of publication of notice of filing because 

such approval will allow OCC’s 

members to immediately participate in 

the expanded portfolio margining pilot 

scheduled to be implemented on April 

2, 2007. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml) or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–OCC–2007–04 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–OCC–2007–04. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Section, 100 F Street, NE., Washington, 

DC 20549. Copies of such filing also will 

be available for inspection and copying 

at the principal office of OCC and on 

OCC’s Web site at http:// 

www.optionsclearing.com. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–OCC–2007–04 and should 

be submitted on or before April 27, 

2007. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (File No. SR–

OCC–2007–04) be and hereby is 

approved on an accelerated basis. 

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.5

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6493 Filed 4–5–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55552; File No. SR–Phlx–

2006–87] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Notice of Filing of Proposed Rule 

Change, and Amendment Nos. 1 and 2 

Thereto, Relating to Options Exchange 

Officials 

March 29, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

14, 2006, the Philadelphia Stock 

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change. On February 23, 

2007, the Exchange filed Amendment 

No.1 to the proposed rule change. On 

March 15, 2007, the Exchange filed 

Amendment No. 2 to the proposed rule 

change. The proposed rule change is 

described in Items I, II, and III, below, 

which Items have been prepared 

substantially by the Phlx. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Phlx proposes to amend various 

rules related to dispute resolution, 

requests for relief from the requirements 

of certain rules, trading halts and order 

and decorum, by transferring the 

responsibilities from Exchange Floor 

Officials 3 to a new category of Exchange 

staff that would be known as an Options 

Exchange Official (‘‘OEO’’), as described 

more fully below. OEOs would replace, 

and assume all authority and 

responsibility currently handled by, 

Floor Officials. Thus, Floor Officials 

would cease to exist on the Exchange. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.phlx.com, at the Phlx, 

and at the Commission’s public 

reference room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Phlx included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. The Phlx has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to establish a new category of 

Exchange staff, the OEO.4 The purpose 

of Amendment No. 1, which replaces 

the previous filing in its entirety, is to 

clarify that OEOs would replace, and 

assume all authority and responsibility 

currently handled by, Floor Officials, 

and to make other technical 

amendments to the previously 

submitted rule text. Amendment No. 2 


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